RICHMOND, Va. (AP) — Camel cigarette maker Reynolds American Inc.'s planned $25 billion takeover of Newport seller Lorillard Inc. is moving forward after shareholders approved the deal at special shareholder meetings Wednesday.
The deal announced in July would combine two of the nation's oldest and biggest tobacco companies, creating a formidable No. 2 to Richmond, Virginia-based Altria Group Inc., owner of Philip Morris USA.
Expected to close in the first half of 2015, the merger faces further federal antitrust scrutiny over how the combination would affect competition in a highly competitive market and cigarette prices, which have grown about 5 percent annually in the last 10 years.
The transaction, which Reynolds and Lorillard value at about $27 billion including debt, would also create a powerhouse in menthol cigarettes, which are becoming a bigger part of the business and gives the combined company some breathing room even as people smoke fewer cigarettes every year.
Reynolds will keep its Camel, Pall Mall and Natural American Spirit cigarette brands, as well as its Vuse e-cigarette brand, and acquire Lorillard's flagship Newport brand.
The deal also would establish a new major player in the country's tobacco market, the U.K.'s Imperial Tobacco, which is buying some of the companies' other brands including Kool, Salem, Winston, Maverick and blu eCig brands to Imperial Tobacco Group for $7.1 billion to ease regulatory concerns about competition. The companies also have said they may need to give Reynolds' Doral brand to Imperial Tobacco — for no additional cost — if mandated by federal regulators or if retail market share of the other brands fall below 4.9 percent.
Once complete, the new company, which will remain based in Winston-Salem, North Carolina, is projected to have more than $11 billion in revenue and claim an about 34 percent share of the U.S. retail cigarette market.
While Reynolds expects to save about $800 million a year in costs because of the deal, the net effect on jobs and the economy in the American South's tobacco country is uncertain.
Reynolds, which has about 5,200 full-time employees and produces its cigarettes at its 2 million-square-foot Tobaccoville, North Carolina, plant, has said it plans to hire, primarily in manufacturing, over 18 months following the closing. Imperial is buying Lorillard's manufacturing and offices in Greensboro, North Carolina, along with about 2,900 employees.
British American Tobacco PLC, which makes Kent and Dunhill cigarettes overseas, will maintain its 42 percent stake in Reynolds, and Lorillard shareholders will hold a 15 percent stake. Reynolds and British American Tobacco also agreed to share technology related to the development and commercialization of next-generation tobacco products, including cigarettes that heat tobacco rather than burning it, and other nicotine-delivery products.
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